MTD will take effect from 1 April 2019 for VAT purposes only for all businesses (unincorporated, companies, LLPs and charities) with turnover above the VAT threshold (currently £85,000). This means that for the first VAT return period beginning on or after 1 April 2019 all VAT registered businesses with turnover above the VAT threshold will be required to:
- maintain digital records, and
- send their VAT information directly to HMRC using compatible software.
From 1 April 2019 VAT registered businesses with turnover above the VAT threshold will no longer be able to send their VAT information to HM Revenue & Customs (HMRC) via HMRC’s online portal.
Has MTD been delayed?
MTD was originally set to go live from April 2018, however, following concerns raised by the accountancy profession, businesses and parliamentary bodies, on 13 July 2017 the government announced a new timetable and changes to the implementation resulting in a delay to the launch of MTD. MTD for VAT will now take effect from 1 April 2019 and all businesses with a turnover above the VAT threshold (currently £85,000). Businesses and landlords with turnover below the VAT threshold will now not be required to keep digital records, or to update HMRC quarterly, until at least April 2020. Despite the delay to the launch of MTD, the government remains committed to digitising the tax system but has confirmed that it will not widen the scope of MTD beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest.
I already submit my VAT return online, don’t I?
Many tax payers already keep digital records however, under MTD from 1 April 2019 all VAT registered businesses with turnover above the VAT threshold will be required to:-
- maintain digital records, and
- Send their VAT information directly to HMRC using compatible software.
From 1 April 2019 VAT registered businesses will no longer be able to send their VAT information to HMRC via HMRC’s online portal.
Will I require specific software or can I still use my spreadsheets?
You will no longer be able to maintain your records manually, if you use spreadsheets they will need to be linked through API compatible software capable of connecting to HMRC systems via an Application Programming Interface (API). We understand that no free software will be available for MTD for VAT however, HMRC are working closely with software providers to ensure a range of suitable products will be available. Businesses will be able to use a combination of software packages or continue to use spreadsheets to record receipts and expenditure to generate the VAT return. However, it will be necessary for information to transfer directly from one software package to the next or for spreadsheets to link digitally to compatible software to submit the VAT return to HMRC. A pilot scheme to trial the process is expected to start in April 2018 and in the first few months will include at most a few hundred businesses.
Will I be exempt?
The following exemptions that currently apply for electronic VAT filing will be extended to cover MTD for VAT:
- Businesses run entirely by practising members of a religious society or order whose beliefs are incompatible with the use of electronic communications and the requirements for MTD.
- Businesses for whom online filing is not reasonably practicable for reasons of disability, age, remoteness of location, or any other reason.
- Insolvent businesses. There will also be an automatic exemption for businesses registered for VAT but have turnover below the threshold.
Do I really have to keep digital records?
There will be no requirement to store invoices and receipts digitally. Businesses can continue to keep documents in paper form, although transactional data, including the time and value of each supply and applicable VAT rate, will need to be stored digitally. Retailers within the VAT retail schemes will be able to record gross daily takings rather than each individual transaction.
What action do I need to take now?
You will need to think about making arrangements for your accounting records so that they are ready for digital submission. This may be by simply contacting your current accounting software supplier to ensure your software is up to date. Suppliers continue to release information about these changes, so don’t delay. If you are not sure how you will make the submissions to HMRC, or you do not currently use any form of accounting package, please contact us to discuss your options.
What support is available to me?
We have been working closely with HMRC and major software developers to discuss how we can make this easier for our clients, ensuring we have the solutions in place to make this transition as smoothly as possible for you. We are already assisting many clients preparing and implementing systems to get them ready for the transition to Making Tax Digital. Contact a member of our Making Tax Digital team today to see how we can assist you.
Tags: Making Tax Digital